Home » Writings and Commentary » Debt and Credit » The Fair Credit Reporting Act and Your Rights as a Consumer

In 1970, Congress passed the Fair Credit Reporting Act (FCRA) to protect consumer rights. The U.S. Federal Trade Commission (FTC) enforces this law.

The FCRA sets guidelines for the collection and reporting of financial information between consumer reporting agencies, individuals, lenders, and employers. Onyx Investments prospects and clients will take pride in maintaining strong credit ratings, in order to access credit and qualify for mortgages on good terms.

Consumer Reporting Agencies

Consumer reporting agencies (CRAs) are intermediaries between consumers, lenders, and employers. The CRA collects applicable consumer information and disseminates this data to interested parties.

Equifax, Experian, and TransUnion are the three major consumer-reporting agencies. Equifax, Experian, and TransUnion are not to be confused with the Big Three credit rating agencies. Standard and Poor’s, Moody’s, and Fitch credit rating agencies are more so involved within financial markets.

Collecting Consumer Information

The basic credit report lists out information related to address, employment, lawsuits, arrests, and most importantly, credit transactions. Lenders typically furnish information to credit bureaus on a monthly basis.

Consumer credit is categorized according to type, creditor, principal balance, and payment history. Credit reporting agencies will then use Fair Isaac Corporation models to generate a FICO, or credit score, to determine an applicant’s credit worthiness. A credit score above 800 is excellent and a reasonable goal.

Distributing Consumer Information

Lenders and landlords will analyze the credit information for prospective borrowers and tenants. Banks routinely check credit reports, prior to approving loans and setting interest rates for mortgages and car payments.

Insurance companies and employers will also monitor personal credit reports as an indicator of character. A credit report may be the difference-maker between two highly qualified candidates. Your credit score is an informal measure of risk.

Correcting Errors on Your Credit Report

Credit report errors may arise either out of erroneously reported information from lenders and banks, or outright identity theft at the hands of scam artists. The Web 2.0 Internet is a feeding frenzy for criminals to phish for personal information and open up fraudulent lines of credit that go unpaid. Erroneous credit reporting will force high interest rate charges or loan application rejection, altogether.

Regularly review reports from all three major credit-reporting agencies to verify information. Contact the CRA and information furnisher to dispute any false data. Equifax, Experian, and TransUnion all supply online correction forms and help desks to guide you through the dispute filing process.

Your Rights as A Consumer

The Fair Credit Reporting Act protects consumers by influencing financial institutions to mathematically gauge default risk, irrespective of race and gender. Your rights as an American consumer specify that relevant credit information is reported accurately and on time.

The Federal Trade Commission sets guidelines limiting the amount of time that bankruptcies and liens can remain on your credit report. Be further advised that any disputes must be addressed, proven, or disproven within 30 days.

The FTC details mandatory language that must be communicated by lenders to consumers – to notify them of rationale behind rejections and adverse decisions. Information furnishers are obligated to issue statements to consumers before and after submitting negative information to credit reporting agencies.

The U.S. Government allows Americans to access one free credit report per year through Annualcreditreport.com. Consumers might also access real-time credit information through their own banking institutions and Credit Karma.